OK cigarette fee ruled a tax

The Oklahoma Supreme Court ruled today that a $1.50 cigarette fee scheduled to go into effect this month is an unconstitutional tax.

In an opinion that drew support from every justice, the Court noted that the Legislature introduced four bills that would have created a similar cigarette "tax," but abandoned them because of lack of support. Late in session, lawmakers finally adopted a "smoking cessation fee."

The ruling begins here with paragraph 4:

After years of declining revenues forced the Legislature to repeatedly make use of non-recurring revenue sources to balance the budget, both the Legislature and the Governor recognized that balancing the budget in 2018 would be impossible without either significant reductions in government spending, the creation of new revenue streams, or perhaps both.

In her 2017 State of the State address, Governor Mary Fallin pleaded with the Legislature to "focus on the REALITY of our state budget deficit," arguing that the Legislature could not "afford to pass another budget using a large amount of non-recurring revenue" because "[i]t is important to provide sufficient revenues to meet the basic responsibilities that our government owes to its citizens."

To accomplish this goal, the Governor urged the Legislature "to raise our cigarette tax" so that "[t]he revenue raised can be spent on current health care needs."

The Legislature heard the Governor's call. Four proposals originated in the House of Representatives, each of which proposed to levy a new $1.50-per-pack excise tax that would be assessed against cigarette wholesalers by the Oklahoma Tax Commission, who would then transmit the collected revenue to the State Treasury for deposit in certain health-agency operating funds. The Tax Commission would enforce collection of the tax through its Cigarette Excise Tax Stamps regime.

Each of the proposals also allowed for Indian tribes to receive portions of the new tax revenues pursuant to their Tobacco Tax Compacts with the State. Two of the four proposals received a floor vote in the House and garnered majority support, but none of the proposals advanced, due to their failure to receive the three-fourths support required by Article V, Section 33. By May 20, 2017, six days prior to the end of the legislative session, the House proposals were abandoned.

Click here for more of the ruling found on the Oklahoma Supreme Court Network.